The price of the Government

The marginal excess burden is the social price of more equality. The marginal cost of public funds for non-redistribution spending equals unity. The cost-benefit criterion is sufficient to evaluate public investment projects.

Social cost-benefit analysis for public goods or environmental policy rules should not be adjusted for the marginal cost of funds, but should take into account second-best interactions with labour supply and distributional effects of public policies.

Debt-policy (tax smoothing) cannot be justified on the basis of tax distortions. Revenue-raising instruments are not preferred over regulation for the realisation of allocative objectives.

This publication is in Dutch.